Holiday Entitlement and Pay for Term-time Only Workers
The Court of Appeal has today handed down an important decision that will affect how holiday entitlement and pay for term-time workers is calculated.
What Is Term-time Only Working?
Term-time Only working arrangements mean an employee works only during school term times and is absent from work out of term time. This does not mean to say that only employees with children can use Term-time Only working.
This generally means that a Term-time Only employee will be at work for 39 weeks in each year and will take 13 weeks as holiday. A basic principle of Term-time Only working is that the employee uses their holiday entitlement during the recognised school holidays and balance up the 13 weeks with unpaid leave.
Time off during term-time is not normally allowed. Depending on the nature of the job some individuals may work on what is generally referred to as a ‘Term-time Plus * week(s)’ arrangement – where * reflects the number of weeks worked during school holidays.
Holiday Entitlement For Part-time Workers
There are regulations that mean that employers must not treat part-time workers less favourably than a comparable full-time worker. If a manager treats a person who works part time less favourably than a comparable full-time colleague, and the reason for the less favourable treatment is that the individual works part time, this will be unlawful (unless the treatment can be objectively justified).
Model Calculations: Holiday Entitlement and Pay For Term-time Only Workers
Holiday Entitlement for Term-time Only workers is calculated on a pro-rata basis and expressed in hours as follows:-
5.6 x (weekly contracted hours) = annual entitlement
(Annual entitlement / 52 weeks) * contracted working weeks = pro rata entitlement
Workers should receive their ‘normal pay’ when they take a holiday. In the case of those whose pay varies, this should be averaged over the previous 12 weeks.
The Harpur Trust v Brazel
The case considered whether holiday entitlement and pay for term-time only workers should be calculated on a pro rata basis.
The Claimant is a music teacher in permanent employment but working term-time only, on irregular hours (around 32) per week.
To ensure she didn’t receive more holiday entitlement and pay than full time staff, The Trust based her entitlement on her working 39 weeks out of 52 each year and capped her holiday pay by applying a fixed formula of 12.07%. [The 12.07% figure is 5.6 weeks’ holiday, divided by 46.4 weeks (being 52 weeks – 5.6 weeks.] She argued that this was incorrect and resulted in a significant underpayment.
She was unsuccessful at the tribunal.
The Employment Appeal Tribunal held that the claimant, engaged on a Term-time Only contract, was entitled to 5.6 weeks holiday per year, even though she didn’t work for the whole year. This was the minimum requirement and it couldn’t be pro-rated to reflect the number of weeks she actually worked. They also determined that her holiday pay should be calculated based on a 12 week average of hours worked, making, on her hours, holiday pay around 17.5% of annual pay, rather than 12.07% for staff working a whole year (based on 5.6/46.4 weeks).
The Court of Appeal Decision
The key issue was whether term time only workers (or others who only work part of the year on permanent contracts) could have their holiday entitlement pro-rated to reflect the number of weeks they actually work each year and, separately how their pay should be calculated.
The pay issue was straightforward. Workers should receive their ‘normal pay’ when they take a holiday. In the case of those whose pay varies, this had to be averaged over the previous 12 weeks. Applying the 12.07% formula was therefore wrong.
The Court said that these workers must receive at least 5.6 weeks holiday entitlement. EU law did not require leave to be reduced pro rata, and it wasn’t necessary to apply a pro rata principle to the accrual of leave under the Working Time Regulations.
For Part-time (whole year) staff, this doesn’t matter because their 5.6 weeks holiday will reflect the hours or days they actually work each week. So, for someone working three days a week, 5.6 weeks holiday amounts to 16.8 days leave.
The Court accepted that this straightforward approach could lead to ‘odd results’ in ‘extreme cases’. It said that employers who only needed staff for a few weeks each year would have to put up with this, or change the way in which they contract with their staff if they didn’t want the ‘additional costs that come with that choice’.
This decision only applies to staff engaged under permanent contracts. You can continue to apply the 12.07% formula to work out the accrual rate for casual staff. But, if you work out the holiday entitlement of term time only workers (and others you engage on other part year contracts) based on the weeks they actually work you will have to change this to make sure they receive 5.6 weeks paid holiday per year – even if they only work a few months per year.
The Court noted that the circumstances of part-year workers may vary widely (from offshore oil rigs to education), and the approach in this case is straightforward and should be followed.